Bringing More Transparency to CRE Investing
Transparency. Accountability. Accessibility. These are all traits commercial real estate investors want, and they are qualities the best sponsors consistently display.
When investors and sponsors don’t see eye-to-eye on these crucial elements, it can lead to trouble. That lesson has come front-and-center here in North Carolina.
Pittenger Land Investments, the land investment firm founded by U.S. Congressman Robert Pittenger (R-N.C.), recently was the subject of a Charlotte Observer article that questioned whether his family’s company properly disclosed markups on land it purchased and then sold to investors who hoped to eventually flip the assets to developers. Some investors told the paper they didn’t know Pittenger sold them stakes at marked-up prices. The FBI is reportedly investigating the firm, though there have been no official allegations of any wrongdoing.
Pittenger Land Investments told the newspaper it has always fully complied with all rules and regulations. It also appears the firm disclosed the necessary information in documents sent to investors.
Why then are some investors still unhappy? I believe technology has changed our expectations. Investors now demand more information, with more context and at a faster pace than ever before. Conducting investor relations the same way it has always been done is no longer enough.
Granted, dust-ups such as the Pittenger dispute boil down to how much information was disclosed properly and how much relevant information was not shared. In Pittenger’s defense, many investors only hear (or read) what they want to hear. However, the debate serves as an important reminder that exceeding expectations with investor communications is paramount.
At Investor Management Services, we’re seeing more and more how important this issue can be. Our clients have told us the most valuable items we can provide are the tools to attract, engage and manage their investors in the 21st century.
Years ago, receiving a paper credit card statement in the mail was an appropriate and acceptable method of staying up-to-date on account balances. Keeping an investment prospectus in a filing cabinet for future reference was standard practice.
Today, any card issuer that only communicates with paper mailings won’t stand a chance in the marketplace. Very few people believe paper filings in a storage room are the best way to access investment records.
Customers now expect and demand real-time updates on their mobile phones. Transactions are documented instantaneously. Legal disclosures and investment details should be available from almost anywhere with a user name and password.
For commercial real estate professionals, this is a game changer, and frankly, we have been slow to adapt. Too often, paper statements with arcane language are mailed to investors with little other communication. That doesn’t cut it anymore. Investors want their real estate holdings and relationships to be as accessible and transparent as their online banking and brokerage accounts. They want all the available information at their fingertips, not just the required minimum mailed periodically in a legal document.
This shift is driving growth at our company. We have added new clients weekly, even in the traditionally slow summer months, and we’re investing in technology updates to deliver the tools sponsors need to provide a top-shelf experience for their investors.
IMS clients are sharing documents and disclosures with online investor portals, granting their investors access anytime and anywhere. Investors are monitoring investment dashboards to track performance. All parties can process transactions with the click of a mouse or the tap of a touchscreen.
In the modern economy, “We didn’t know,” is no longer a good excuse. The tools to manage investor-sponsor relationships are delivering transparency, accountability and accessibility we all should enjoy.